Monday Watch

Weekend Headlines
Bloomberg:

• Europe Seeks to Restore Calm After Spain Downgrade, Growth Spat. European leaders will seek to restore market calm this week after Spain was cut by Standard & Poor’s and a German-led austerity agenda to resolve the debt crisis came under fire ahead of elections in France and Greece. With Spain’s largest unions leading marches involving thousands of protesters in 55 cities yesterday, Prime Minister Mariano Rajoy’s government battled to prevent Spain from becoming the next country to seek bailout aid. In France, the final round of presidential elections on May 6 and the prospect of victory for Socialist candidate Francois Hollande steered debate toward whether a focus on budget cuts worsens the crisis. “Watching Spain now is exactly like watching Ireland around October 2010 before Ireland was forced into its bailout,” Megan Greene, a senior economist at Roubini Global Economics LLC, told Bloomberg Television’s “Street Smart” on April 27. “The government can’t win no matter what it does.”
• Schaeuble Says EU Fiscal Pact Will Come Into Force, Welt Says. German Finance Minister Wolfgang Schaeuble said the fiscal pact agreed by leaders of 25 European nations will come into force, Welt am Sonntag reported, citing an interview. The pact brings “confidence in the long-term stability of the system,” Die Welt cited Schaeuble as saying. Renegotiating the fiscal pact completely is a utopia, Jean-Claude Juncker, the head of the group of euro-area finance ministers told Die Welt. Juncker told the German newspaper that he would talk to Francois Hollande, who wants the pact renegotiated, if he is elected a France’s new president on May 6. European Central Bank Executive Board member Joerg Asmussen said the fiscal pact should be kept in its current form, Welt am Sonntag reported. German Chancellor Angela Merkel on April 28 ruled out reopening negotiations on the fiscal pact.
• Spanish Unions March in Madrid Against Government Spending Cuts. Spain’s two largest unions led marches in cities across the country to protest Prime Minister Mariano Rajoy’s spending cuts, including the reduction of health care subsidies. Thousands of people marched to El Sol square in downtown Madrid, gathering under umbrellas to shelter from the rain. Comisiones Obreras and UGT led protests in 55 cities across Spain today, El Mundo newspaper reported.
• Record-High Gasoline Further Burdens Consumers in Europe. Mumtaz Ozkaya, a leather-clothing salesman in London, is slashing his usual 1,000 miles (1,609 kilometers) a month of driving by 30 percent and taking cheaper vacations, as record fuel prices burden European motorists. “Wages are still the same so I am cutting back on miles and also on holidays,” Ozkaya said in an April 23 interview at a Shell-branded service station near Old Street in the U.K. capital, where regular gasoline costs 143 pence a liter ($8.76 a gallon). “Whereas we used to go on holiday to a five-star hotel for three weeks that is now a four-star for two weeks.” The average retail price in the European Union’s 27 member nations surged to a peak of 1.69 euros a liter ($8.44 a gallon) on April 20 with Germany, France, the U.K., Greece, Italy and Spain all at records, according to European Commission data. The cost of gasoline at the pump in the continent, more than double U.S. levels, had made a fresh high every week since Jan. 13. U.K. gasoline advanced to a new all-time high last week.
• Saudis Accept Bin Ladens on 'Humanitarian Grounds,' Awsat Says. Saudi Arabia allowed the widows and children of slain al-Qaeda leader Osama bin Laden to enter the kingdom on “humanitarian grounds” after they were deported from Pakistan, the London-based Asharq al-Awsat reported, citing an unidentified Saudi official.
• Hon Hai Drops by Limit After Net Misses Estimates: Taipei Mover. Hon Hai Precision Industry Co. (2317), assember of Apple Inc. (AAPL)’s iPhone and iPad, dropped by the daily limit in Taipei trading after posting profit that missed the average estimate of 10 analysts by 31 percent. The stock price fell 7 percent to NT$92.40 as of 10:27 a.m., the biggest intraday decline since December 2008. The benchmark Taiex (TWSE) index lost 0.7 percent.
• Oil Slips From Near Four-Week High; Hedge Funds Cut Bullish Bets. Oil slid from the highest close in almost four weeks, trimming a monthly gain, as investors speculated that recent price gains may be unsustainable. Futures fell as much as 0.3 percent after climbing for a second week. Oil’s advance halted after it failed to surpass its 50-day moving average, a technical resistance level at which traders typically sell. Hedge funds cut bullish crude bets last week, the Commodity Futures Trading Commission said. Output by the Organization of Petroleum Exporting Countries climbed to the highest level in more than three years in April. A report this week may show U.S. employment rose this month. Crude for June delivery fell as much as 27 cents to $104.66 a barrel on the New York Mercantile Exchange and was at $104.69 at 11:11 a.m. Sydney time. The contract advanced 38 cents, or 0.4 percent, to $104.93 on April 27, the highest close since April 2. Prices are 1.6 percent higher this month and up 6 percent this year.

Wall Street Journal:

• Falcone Agrees To Step Aside. Hedge-fund manager Philip Falcone agreed to step aside eventually as the public face of his LightSquared Inc. venture, a concession that may keep the wireless-telecommunications company from defaulting on its debt, people familiar with the negotiations said. Mr. Falcone's compromise is expected to prompt LightSquared's lenders to approve a one-week extension on a debt-term violations waiver that expires Monday morning, the people said.
• Warren Stephens: How Big Banks Threaten Our Economy. We should promote competition and innovation in the financial industry, not protect an oligopoly.

Business Insider:

• Hugh Hendry Is Back: Here's What's In His Monster New Letter To Shareholders.
• The Scope Of The Alberta Oil Sands Must Be Seen To Be Believed. (pics)
• Morgan Stanley(MS) Explains How Next Weekend's Greek Election Could Lead To The Unraveling Of The Entire Euro.
• You Must Read This Paragraph From Francois Hollande's Big Speech.
• California Tax Revenue Is Coming Up Wildly Short Of Expectations.
  

Zero Hedge:

• Don't Forget Portugal: MS Sees A Second Bail-Out By September With A Bail-In To Follow.
• Europe's "Dead Bank Walking" List And An ETA Until The Next Contagion Peak.
• “A Trillion Here, A Trillion There...” – Why 90% Of The European Bank Sector’s Market Cap Is Vaporware*.

CNBC:

• Exporters Unable to Rely on China's Growth.
  

Seeking Alpha:

• 9 Undervalued Healthcare Stocks Being Snapped Up By Hedge Funds.

IBD:

• Shuffle Master(SHFL) Deals Wall Street Strong Hand In Q1.

Forbes:

• 4 Shocks That Could Change China.
  

CNN:

• Hedge Funds Bet Against Eurozone. Hedge fund managers make for unlikely supporters of François Hollande, the French socialist presidential candidate. But it is Mr Hollande's potential victory in the coming second round of the French elections, and with it a sharp deterioration in sentiment surrounding France's creditworthiness in the bond market, that many hedge funds are now anticipating. Indeed, their bets against the bonds of "core" eurozone countries -- not just France, but Germany and the Netherlands too -- represent a new, deeper level of bearishness on the single currency area's prospects. The European Central Bank's longer-term refinancing operation provided a huge shot in the arm to banks and markets in the first quarter of the year and triggered a huge rally in credit. But its impact is now being questioned by growing numbers of hedge funds. "The deeper balance of payments problems in the eurozone remain unresolved, and cannot be resolved by liquidity assistance alone," noted Brevan Howard, Europe's biggest global macro hedge fund in its last letter to investors.

ABC News:

• President Obama on Palin: 'What's the difference between a hockey mom and a pit bull? A pit bull is delicious.' (video)
  

Real Clear Politics:

• Swing Voters Dissatisfied With Obama.
  

Financial Times:

• German Banks Rein In Exposure To Spain. The aftermath of Spain’s property boom is providing a reminder that German banks have not been far away from some of the frothiest lending of banking’s bubble years.
  

The Telegraph:

• Hollande's 'Growth Bloc' spells end of German hegemony in Europe. The French-led counter-attack and rumblings of revolt through every branch of the EU institutions last week have brought this aberrant phase of the eurozone crisis to an abrupt end. "It’s not for Germany to decide for the rest of Europe," said François Hollande, soon to be French leader, unless he trips horribly next week. Strong words even for the hustings. "If I am elected president, there will be a change in Europe's construction. We’re not just any country: we can change the situation," he said.
• Spain's woes to deepen as it double-dips into recession. Spain is set to officially confirm that it fell back into recession in the first quarter of the year, marking the beginning of what is expected to be another rocky week for the ailing eurozone economy.

BBC:

• London 2012 Olympics: Missiles May Be Placed At Residential Flats. The Ministry of Defence is considering placing surface-to-air missiles on residential flats during the Olympics. An east London estate, where 700 people live, has received leaflets saying a "Higher Velocity Missile system" could be placed on a water tower.

ABC:

• A Spanish decision to leave the euro would be positive for the country, according to a third of people polled for a survey. About 54% said a Spanish exit would be negative compared with 33.5% who would view it as economically positive, according to a DYM survey.
  

JoongAng Ilbo:

• The U.S. expects North Korea may conduct a third nuclear test as early as this week, citing a person familiar with the issue in Washington D.C.

The Economic Times:

• Spain's Housing Bubble A Threat To Its Banking Sector.

Weekend Recommendations

Barron's:

• Made positive comments on (EBAY), (TMO), (CMVT) and (ORCL).

Night Trading

• Asian indices are -.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 163.0 -4.0 basis points.
• Asia Pacific Sovereign CDS Index 136.50 unch.
• FTSE-100 futures +.17%.
  
• S&P 500 futures +.12%.
• NASDAQ 100 futures +.16%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WPI)/1.59
• (NYX)/.48
• (HUM)/1.54
• (MCK)/2.06
• (FLS)/1.61
• (JEC)/.74
• (PCL)/.24
• (SPF)/.00
• (APC)/.83
• (WMS)/.42
• (CNA)/.68
• (L)/.89

Economic Releases
8:30 am EST

• Personal Income for March is estimated to rise +.3% versus a +.2% gain in February.
• Personal Spending for March is estimated to rise +.4% versus a +.8% gain in February.
• The PCE Core for March is estimated to rise +.2% versus a +.1% gain in February.

9:45 am EST

• The Chicago Purchasing Manager Index for April is estimated to fall to 60.5 versus a reading of 62.2 in March.

10:30 am EST

• Dallas Fed Manufacturing Activity for April is estimated to fall to 8.0 versus 10.8 in March.
  

Upcoming Splits

• (SCVL) 3-for-2
• (ASUR) 3-for-2
  

Other Potential Market Movers

• The Spain Q1 GDP report, NAPM-Milwaukee for April and the RBC Capital Financial Institutions Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.